By Alvin Cheng-Hin Lim

The China-Pakistan Economic Corridor Two Years On

In
the two years since Chinese President Xi Jinping’s official
announcement of the China-Pakistan Economic Corridor
(CPEC) during his state visit to Pakistan on April 20, 2015, the first slate of
“early harvest” CPEC projects are poised to be completed. Jian Han, the
Political and Press Counselor at the Chinese Embassy in Pakistan, describes
CPEC as having “entered the stage of fast-track implementation,” with 2017-18
being “the year of comprehensive implementation with Early Harvest Projects
reaching fruition.”

CPEC
Project Director Hassan Daud Butt states that with the completion of the Early Harvest
Projects in 2018, “about 7,000 MW of energy would be added to
the national grid and linkages of Eastern and Western routes would be
completed.” This will set the foundation for CPEC to move into its
“industrialization phase,” with “the commencement of work on the development of
nine industrial zones to be set up under CPEC across the country.” Chinese
experts and Pakistan’s Board of Investment will work together “to ensure
maximum investment” in these industrial zones. The completion of the Western
route would also open up the underdeveloped provinces of Khyber Pakhtunkhwa and
Balochistan for accelerated development, with
the completion of the network of highways linking Gwadar Port in the south with
the Khunjerab Pass in the north providing much-needed transportation connectivity
to previously inaccessible areas.

To
support these ongoing projects, the Pakistani government has budgeted “180 billion rupees (USD 1.71
billion) for the China-Pakistan Economic Corridor (CPEC) and its projects
during the 2017-18 financial year,” which will be the third year of CPEC’s
implementation. Also, in late May 2017, during Pakistani Prime Minister Nawaz
Sharif’s visit to Beijing to attend the Belt and Road Forum, PM Sharif and
President Xi signed almost USD 500 million worth
of additional deals for CPEC, including agreements for Gwadar Airport, East Bay
Expressway, and Havelian Dry Dock.

In
the broader Central Asian
region, the connectivity to the Indian Ocean offered by
CPEC’s growing land transportation network and Gwadar Port, and the oil and gas
pipelines that will be constructed under CPEC, have drawn the interest of the
governments of Kazakhstan, Tajikistan, Turkmenistan, and Uzbekistan. In the
long-term, even after CPEC is completed within Pakistan, the CPEC network could
potentially be extended beyond Pakistan’s borders into Central Asia.

Long-Term Projects

The
Pakistani government has submitted its proposal to China for
projects to be completed under CPEC’s long-term plan, which are projects scheduled
to be completed by 2030. (Projects under the short- and mid-term plans are
scheduled to be completed by 2020 and 2025 respectively.) In terms of
connectivity, Pakistan has proposed the development of an “integrated transport
system” which includes the expansion of the highway network
as well as the “expansion of existing railway lines and … the modernization of
the railway.” The development of the integrated transport system also includes the
construction of the “East Bay Expressway and the new international airport.”

In
the energy sector, Pakistan’s proposal to China for CPEC long-term projects
includes the construction of oil and gas pipelines from Gwadar Port into China.

In
the finance sector, Pakistan has proposed to China that they expand their cooperation
on currency swaps “to support the financing for projects along the CPEC.”
Pakistan has also proposed the creation of a “bilateral payment and settlement
system to reduce the demand for third-party currency” as well as “the
establishment of a settlement platform for RMB cross-border trade and
investment.” Pakistan has also recommended greater support for both countries’ “enterprises
and financial institutions in carrying out direct financing for projects along
the CPEC in each other’s capital markets,” including greater cooperation
between their stock exchanges and the development of a “cross-border credit
system” and “cross-border financial services.” In addition, in its proposal for
the CPEC long-term plan, Pakistan has also requested increased financing from
the China-led Asian Infrastructure Investment Bank to support its future
development needs.

In
terms of IT and
communications, Pakistan has proposed developing
“information connectivity … through construction and operation of local
communication networks and broadcast and TV networks.” The proposal recommends
that this development of Pakistan’s IT and communications connectivity be
facilitated through the construction of a cross-border fiber-optic network and
the upgrading of “Pakistan’s network facilities, including the national data
center and the second submarine cable landing station.” Pakistan has also
proposed cooperation with China for the incorporation of IT in e-commerce, “IT
industrial parks and IT industry clusters,” as well as e-government initiatives
such as electronic border controls.

In
the energy sector, Pakistan’s proposal to China for CPEC long-term projects
includes the construction of oil and gas pipelines from Gwadar Port into China.
These pipeline projects will involve the construction of oil refineries and
storage facilities “at Gwadar and along CPEC route.” The proposal also includes
the development of clean energy such as hydropower, wind, and solar power
plants. In the industrial sector, Pakistan proposes cooperation with China to improve
its textile and garment manufacturing industries as well as “industrial
capacity cooperation in sectors such as chemicals, engineering, agro, iron
& steel and construction materials.” In the agricultural sector, Pakistan
proposes cooperation with China in “biological breeding, production, processing,
storage and transportation, infrastructure construction, disease prevention and
control, water resources development and utilization, land development and
remediation, ICT-enabled agriculture and marketing of agricultural products.”

Security Concerns

The kidnapping in
late May 2017 in Quetta, the capital of Balochistan province, of two Chinese nationals
who were operating a Chinese language school, has raised concerns in China over
the security arrangements for CPEC, especially since Balochistan is the province
where Gwadar Port is located. As Wang Wenwen reminds
us, “Islamic militants have often carried out abductions of foreigners on
Pakistani soil, either for ransom or to get publicity for their cause. Chinese
people have also been targeted occasionally, despite the friendly relations
between the two countries.” Balochistan in particular “has seen frequent
violence committed by Islamic terrorists and separatists and the Belt and Road
program is often exposed to potential threats. Last year, a Chinese engineer
was injured in a bomb attack in southern Pakistan and a separatist group, the
Sindhudesh Revolutionary Army, claimed responsibility for the attack, saying
they were targeting the CPEC.”

As
with the jihadi militant groups who have attacked CPEC installations, violence
against CPEC has come from separatist groups as well, including the
abovementioned Sindhudesh Revolutionary Army and the Balochistan Liberation
Army (BLA), which in mid-May 2017 murdered 10 laborers working at a road
construction site in Gwadar. As Syed Ali Shah notes:
“Though the road where the laborers were working was not a specific CPEC-funded
project, it was a part of a network of connecting roads that are part of the
corridor — a common target for separatist militants who view construction
projects as a means to take over their land.”

In
the meantime, one of the tribal leaders of the Baloch community, the current Khan of Kalat, Mir
Suleman Dawood Jan, who is currently living in exile in the UK, has condemned
CPEC as a “Chinese military project” and an “existential threat” to the Baloch
people. The Khan’s comments could add fuel to the fire of the BLA and the Baloch
separatist movement, which see Balochistan as a victim of “illegal occupation” by
the “‘barbarian Pakistan army.”

Apart
from militant violence, another significant threat to the successful completion
of CPEC comes from India. A recent report from
UNESCAP (United Nations Economic and Social Commission for Asia and the
Pacific) warns of the danger posed by the geopolitical tensions and “political
instability” which are likely to be triggered should CPEC installations be
constructed in Pakistan-occupied Kashmir — disputed territory which is
controlled by Pakistan but which is claimed by India. CPEC threatens to draw
China into this long-standing bilateral dispute.

About The Author

Alvin Cheng-Hin Lim is a research fellow with International Public Policy Pte. Ltd. (IPP), and is the author of Cambodia and the Politics of Aesthetics (Routledge 2013). He received his Ph.D. in Political Science from the University of Hawaii at Manoa, and has taught at Pannasastra University of Cambodia and the American University of Nigeria. Prior to joining IPP, he was a research fellow with the Longus Institute for Development and Strategy.